In Brief
Zenith Drugs & Allied Agencies held a clearing and forwarding agent agreement with Rhone Poulence India Limited (RPIL) containing an arbitration clause. When RPIL merged with Nicholas Piramal India Ltd. (NPIL), the agreement was terminated. The parties compromised the earlier dispute, and NPIL appointed Zenith as a stockist at Guwahati and Agartala, paying compensation. When NPIL subsequently refused to honour the stockist appointment, Zenith sued for compensation for loss of goodwill and reputation. NPIL invoked the arbitration clause from the original C&F agreement. The Supreme Court held that a compromise decree creates a new, distinct agreement; the arbitration clause in the original contract cannot be imported into disputes arising from the compromise arrangement or events post-compromise. The Court allowed the appeal and restored the suit to the trial court.
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